Trading Secondary CERS from Hydropower Projects Above 20MW

This memorandum examines issues that have arisen regarding EU Member State recognition of Certified Emissions Reductions (CERs) from hydropower publications above 20MW (“Hydro CERs”).

The analysis carried out in this memorandum is two-fold. First, it examines the issue of if Hydro CERs, at present, are mutually recognized and thus freely tradable (fungible) on the European Union Emissions Trading Scheme (EU ETS) secondary market. Then, it analyses the issue of if and how a Member State could impose restrictions on Hydro CERs generated by a hydro publication that another Member State has approved.

This memorandum concludes that currently Hydro CERs are fungible. This conclusion is based on the Linking Directive’s plain language, which only sets forth criteria for the approval of hydro publications, not the approval and transfer of Hydro CERs from such publications. As this memorandum demonstrates, even if a Member State would seek to impose restrictions on Hydro CERs that another Member State has approved, it is unlikely that the imposing of such restrictions would be allowable under EU Law.